An oil platform in the South China Sea. (Photo/Xinhua)
The Chinese currency stands to benefit in several ways from sanctions that are being imposed on Iran by western nations, reports the Chinese-language magazine Time Weekly in Guangzhou.
Oil trading between China and Iran is estimated to be worth US$20-US$30 billion annually, with part of the payments being made through the exchange of goods rather than cash, the magazine reported. China is the largest buyer of Iranian oil, purchasing up to one-fifth of its oil exports. Iran is the third-largest oil exporter to China, accounting for 11% of China's oil imports last year.
What is more, Iran has been saving its high-quality light crude for China in the past several years, the newspaper added.
The Iranian sanctions, which heavily restrict Tehran's access to America's robust financial system, highlight a growing unease over the ubiquity of the US dollar. The so-called BRICS nations — Brazil, Russia, India, China and South Africa — announced in March that they plan to promote the use of their own currencies, rather than the US dollar or euro, in trades between them.
Tehran can now look to the renminbi for solace. The use of the currency allows Iran to diversify risks away from the US dollar, and can also boost overall overseas trade in the Chinese currency, according to Bai Pongming, a researcher with Chinese consultancy CIConsulting.
The newspaper said the renminbi has become a hard currency in Southeast Asia, while being increasingly accepted in Hong Kong, Macau and Russia. Wider acceptance of the currency will lower costs for Chinese companies and banks, creating greater trade opportunities and increasing tax revenue for China, Bai said, privileges long enjoyed by the US.
Yet industry insiders now say sanctions aimed at pushing Iran to abandon nuclear enrichment could impact China's oil supplies and energy security in the mid- to long term. The sanctions extend to companies that do business with Iran. One state-owned Chinese company, Zhuhai Zhenrong, was called out by Washington in January for dealing with Iran, and faced a ban on loans of over US$10 million from American banks.
When asked by the newspaper about the details of the company's business arrangement with Iran, Zhen Mei, head of Zhuhai Zhenrong's public affairs department, declined to comment, but denied that the payment was made through Russian banks, as was suggested by a report in the Financial Times.